I shall not name the management team being described. But, according to my friend, they saw e-learning as the greatest thing ever. It would mean that everything could go online; they would need far fewer training staff and could save lots of money. There is an assumption around that e-learning reduces costs (with perhaps another debate about quality which we will not go into here). But can we even assume that much? Do we even know what e-learning costs?

The question “how much does e-learning cost?” was posed in an article written by Laurie Bassi, (2000). She started with a strong caution:

“One of two things is true if someone claims to have “the” answer: (1) they don’t know what they are talking about, or (2) they are trying to sell you something.”

The second part of this, at least, still seems to hold true. A quick Google search will turn up numerous claims that e-learning will cut costs. One typical site states boldly:

It goes on to cite three corporate case studies, and then list the advantages such as reduced travel time and facilities. Of course, our source here is a company selling e-learning. To be fair, they only say that e-learning “can” save money. This implies that e-learning will sometimes not save money, in fact it might be an expensive flop. Look no further than the UK e-University for an example

Bassi’s key point is that organisations are not very good at measuring the total costs of e-learning, let alone the benefits. The fixed costs of e-learning are usually very high, even though the costs of delivery are generally lower than traditional learning. This means that you need to be assured of a high volume of learners before it even begins to look attractive. This is a key point, to which we will return.

She also cautions that “shifting” costs is not the same as eliminating them:

“One of the great attractions of elearning is that it enables employees to engage in learning “on their own time.” While this does have the benefit (from the employers’ perspective) of reducing the indirect cost of learning, it does not mean that this cost goes away. Rather, it shifts to employees.”

In other words, making your employees do training outside work hours, for no extra pay, is likely to carry some costs in morale, productivity, retention etc.

Academic research

The argument that assessing the cost of e-learning is complex and done poorly is made in much more detail in an academic paper by Greville Rumble (2001). He cites detailed evidence to make a number of interesting points, including:

The costs of e-learning, like most technology projects, tend to be mostly up-front, with usage spread over a number of years. This makes financial analysis complex;

E-learning materials take significantly longer to develop than face-to-face, particularly the more interactive type;

E-learning relies for its cost-effectiveness on splitting the roles of design and delivery of courses. The most successful providers of e-learning such as the Open University and the University of Phoenix use this split. However, Rumble noted that, subject to some exceptions like this, “practice in America has generally not led to any systematic restructuring of academic labor force”. This is probably still true, and not just of America. Maybe it is yet to come. (Full disclosure: My employer’s ultimate parent company also owns the University of Phoenix);

Overheads and cost of management involvement are often not taken into account, at least not comprehensively;

It is hard even to establish a cost measure to compare e-learning with traditional learning. Do you opt for cost per student? Cost per study hour? Cost per course?

This paper goes back eleven years now, so have we made progress on these issues? It would seem not. There is surprisingly little academic literature in this area – one recent paper (Sharma, 2011), makes many of the same points as Rumble, and sets out some proposed new approaches. Sharma notes that, even now, many educational institutions do not practise any form of activity-based costing, making it impossible for them to assess the cost of time spent on projects like e-learning. He also notes the high cost of LMS’s, a point made with more vigour in a 2009 blog post from Ben Betts, who himself runs an e-learning provider.

They are powerful arguments. Just to be clear, I am a firm believer in the potential benefits of e-learning, in its ability to make learning accessible, interesting and, yes, maybe even cheaper for a wider range of learners. But organisations need to be much more careful in how they assess this and be careful that they are capturing all the relevant costs.

Cost structures and implications

Everyone agrees, though, the e-learning changes the cost structure of education very profoundly. Fixed costs become higher, as investment is needed for development, but variable costs become lower, as tuition itself does not require as much faculty time, or money spent on premises. In this sense, it is similar to the software market generally – once software is developed, the cost of selling one more copy is pretty much zero. This creates some interesting pricing models, often known as “freemium”. For example, I get some very nifty blogging software from WordPress for free, because it costs pretty much nothing for WordPress to provide it to me – the costs are all to do with development. WordPress make their money because a small proportion of users are willing to pay for a version with extra features. Giving the software for free also builds market awareness – and this is a business all about scale.

If this same cost structure increasingly applies to education, might we expect to see some changes in higher education, in particular? Here are a couple of pieces of speculation about where this might go:

2) The “freemium” model will become more popular – give away the basic product on the basis that some users will pay for the upgraded one. This is part of the logic behind the Open Education Resources movement, which I have previously blogged about. Materials can be made available for free, with payment for actual tuition and accreditation. This movement undoubtedly has further to go, perhaps with increasingly sophisticated “try before you buy” opportunities.

So does e-learning save money? The answer has to be very much “it depends”. But we can put the question another way – does e-learning involve spending money in a different way? Definitely. Expect to see the implications of this worked out over the coming decades.